Audit sampling involves applying an audit procedure to less than 100 percent of the population for the purpose of evaluating some characteristic of the population. When an auditor uses sampling, an element of uncertainty enters into the auditor's conclusions. Required: a. Explain the auditor's justification for accepting the uncertainties that are inherent in the sampling process. b. Discuss the uncertainties that collectively embody the concept of audit risk. c. Discuss the nature of sampling risk and nonsampling risk. Include the effect of sampling risk on tests of controls in terms of Type I and Type II errors.
Audit sampling involves applying an audit procedure to less than 100 percent of the population for the purpose of evaluating some characteristic of the population. When an auditor uses sampling, an element of uncertainty enters into the auditor's conclusions. Required: a. Explain the auditor's justification for accepting the uncertainties that are inherent in the sampling process. b. Discuss the uncertainties that collectively embody the concept of audit risk. c. Discuss the nature of sampling risk and nonsampling risk. Include the effect of sampling risk on tests of controls in terms of Type I and Type II errors.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:8-21
Audit sampling involves applying an audit procedure to less than 100 percent
of the population for the purpose of evaluating some characteristic of the
population. When an auditor uses sampling, an element of uncertainty enters
into the auditor's conclusions.
Required:
a. Explain the auditor's justification for accepting the uncertainties
that are inherent in the sampling process.
b. Discuss the uncertainties that collectively embody the concept of
audit risk.
c. Discuss the nature of sampling risk and nonsampling risk. Include
the effect of sampling risk on tests of controls in terms of Type I
and Type II errors.
Expert Solution
Introduction
Sampling risk is the possibility that the items chosen in a pattern aren't truly representative of the population being examined. This is a major problem because an auditor no longer has the time to analyse the entire population and must instead rely on a trend.
One error that might result from the sample threat is that the auditor incorrectly determines that there are less problems with the populace than anticipated, which may result in an incorrect audit conclusion.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education